Former Pennsylvania Congressman Ron Klink authored the following op-ed published on TribLive:
October 8, 2020
Never in the history of the modern world has there been such a desperate need for the pharmaceutical industry to be able to save our world and return all of us to a form of normality. Covid-19 is impacting everyone, including the leader of the free world and his family. Yet before becoming ill himself, in a last-minute bid to curry favor with senior voters, President Trump signed a blitz of executive orders aimed directly at this industry and its ability to perform.
One in particular, aimed at lowering drug prices, would tie Medicare reimbursements to much-lower foreign drug prices. The proposal has some superficial appeal. But the long-term impact would devastate American workers and patients.
Most developed countries impose strict price controls on medicines. The U.S. is one of the few exceptions. As a result, drug prices are higher here than they are abroad, but drugs are available here that are not yet available in other countries. Trump’s order seeks to close this price gap by prohibiting Medicare reimbursements from exceeding the lowest price available in any advanced nation with a “comparable per-capita GDP.”
This massive overhaul would reduce drug prices here — at least for a time — but the tradeoff is not worth it. There would be disastrous effects on our biotech industry and the millions of jobs it provides.
Developing new drugs is extraordinarily expensive and risky. After accounting for the nearly 90% failure rate in clinical trials, pharmaceutical manufacturers spend $2.6 billion and over 10 years, on average, to bring a single treatment from the lab to pharmacy shelves.
Government price controls make drug development untenable. By definition, they limit the amount manufacturers can recoup from the few successful products that reach the public. That, in turn, discourages investments in future pharmaceutical ventures.
Trump knows this but evidently doesn’t care. His own White House Council of Economic Advisers warned last year that sweeping price control legislation, which included price caps similar to those in the executive order, could prevent the creation of 100 new medicines over the coming decade.
Losing out on a future cure for Alzheimer’s or cancer would be awful. Not being able to treat or stop covid-19 would continue to be devastating. But that’s not the only reason to oppose the president’s executive order. The measure would also cause massive job losses right here and now.
Covid-19 has devastated our economy worse than anything in living memory. Over 57 million Americans have filed for unemployment since the pandemic began.
The president’s order would compound these economic woes. Right now, the biopharmaceutical industry directly employs over 800,000 people in the United States and supports 4.7 million jobs nationwide — nearly 300,000 of which work exclusively in research and development.
Many of those positions are good union jobs. In Pennsylvania alone, union laborers earned $45 million installing or maintaining biotech research and manufacturing facilities from 2012 to 2017. Over the same time frame, union tradesmen and women earned at least $450 million working on similar projects nationwide.
Once firms start bleeding revenue as a result of government price-setting, they’ll have no choice but to scrap expansion plans and curtail spending on new research projects and facilities. Ph.D. scientists and blue-collar tradesmen alike would feel the pinch. In the midst of the Great Recession, the biopharmaceutical industry shed some 80,000 jobs across various specialties.
I’ve spent my entire career — including eight years in the House of Representatives — fighting to improve the lives of working Americans. I know just how crippling the president’s order would be for the small towns and communities that make up the backbone of our nation.
That doesn’t mean the president should do nothing, of course. There are plenty of steps our leaders could take to lower seniors’ pharmacy bills. And tackling foreign countries’ unfair price setting ought to be a priority no matter who wins the November election.
But we’re in the midst of a public health and economic crisis. There has never been a more inopportune time to import foreign price controls. They’d harm American patients and workers for years to come.
Ron Klink is a former Democratic U.S. representative from Pennsylvania and is currently senior policy adviser at Nelson Mullins Riley & Scarborough LLP.